Prudential plc Annual Report 1999

Transcription

1 Prudential plc Annual Report 1999

2 New business achieved profits up 46 per cent at 603 million Record in-flow of new funds of over 18 billion Underlying operating profit before amortisation of goodwill up 6 per cent to 996 million Total dividend up 9.5 per cent to 23 pence per share Plans for an initial public offering of a minority stake in egg: to be pursued* *Legal disclaimer. The information in this report related to the proposed egg: flotation is not an offer of securities for sale into the United States, Canada or Japan. The egg: securities may not be offered or sold in the United States unless they are registered under applicable law or exempt from registration. egg: does not intend to register any portion of the proposed flotation in the United States or to conduct a public offering of securities in the United States. 1 Group Financial Highlights 2 Prudential at-a-glance 3 Our Purpose 4 Chairman s Statement 6 Group Chief Executive s Review Review of Operations 10 egg: and Prudential Banking 12 Retail IFA 14 Prudential Retail Financial Services 14 Prudential Annuities 16 Prudential Group Pensions 18 Prudential M&G Asset Management 18 Prudential Portfolio Managers 20 M&G 22 Prudential Europe 24 US Operations 26 Prudential Corporation Asia 28 Group Financial Review 32 Corporate Social Responsibility 34 Board of Directors 36 Corporate Governance 39 Remuneration Report 45 Directors Report 47 Summary of Statutory Basis Results Statutory Basis Financial Statements 48 Consolidated Profit and Loss Account 51 Consolidated Statement of Total Recognised Gains and Losses 51 Reconciliation of Consolidated Movement in Shareholders Capital and Reserves 52 Consolidated Balance Sheet 54 Balance Sheet of the Company 55 Consolidated Cash Flow Statement 56 Accounting Policies 59 Notes on the Financial Statements 73 Auditors Report 74 Five Year Review Achieved Profits Basis Supplementary Information 76 Operating Profit from Continuing Operations 77 Summarised Consolidated Profit and Loss Account 78 Summarised Consolidated Balance Sheet 79 Reconciliation of Movement in Shareholders Capital and Reserves 80 Notes on the Supplementary Information 82 The Achieved Profits Basis of Financial Reporting 83 Auditors Report on the Supplementary Information 84 Shareholder Information IBCHow to Contact Us

3 Group Financial Highlights 1999 m 1998 m Statutory operating profit (based on longer-term investment returns) before amortisation of goodwill Retail Insurance Operations Group Pensions Prudential M&G Asset Management egg: and Prudential Banking (150) (77) UK operations US operations Asia Europe 6 4 Other income and expenditure (78) 38 Re-engineering costs (70) Total Discontinued operations 8 Operating profit before amortisation of goodwill Amortisation of goodwill (54) Short-term fluctuations in investment returns Profit on business disposals 249 Profit before tax (including actual investment returns) 750 1,141 Earnings per share Based on operating profit after tax before amortisation of goodwill 29.1p 33.7p Based on profit after tax basic 27.8p 45.3p Based on profit after tax diluted 27.7p 45.0p Dividend per share 23.0p 21.0p Achieved profits basis shareholders funds 8.3bn 7.5bn Insurance and investment funds under management 170bn 128bn Banking funds under management 8.1bn 2.2bn Profit before tax includes actual investment returns. The company believes that operating profit, which is based on longer-term investment returns, before amortisation of goodwill better reflects the group s underlying performance. Prudential plc Annual Report

4 egg: was launched in October 1998 and has become established as a household name. It is the UK s leading financial services e-commerce brand. egg : provides competitive, customer friendly savings, loan and other products. Scottish Amicable was acquired by Prudential in With two million customers, it is Prudential s leading Independent Financial Adviser (IFA) brand. It is committed to supporting advisers through a combination of high levels of service and a strong product range. Prudential s operations in the UK comprise Prudential Retail, Life and Pensions, General Insurance and Prudential Annuities. Prudential Retail provides high quality advice to six million customers requiring a broad range of financial products including life insurance, pensions and savings plans. Prudential Group Pensions provides employer sponsored pension schemes to over 500,000 people in the UK. Working with many of the country s leading companies, its new e-commerce platforms put it at the forefront of developments in the industry. Prudential Portfolio Managers (PPM) manages 145 billion worldwide, mostly on behalf of Prudential s internal clients. Its primary fund is Prudential s UK Life Fund the largest such fund in the UK. M&G was founded in 1931 and was acquired by Prudential in It has 21 billion funds under management and is the largest retail unit trust manager in the UK. Its products include unit trusts, ISAs and investment trusts. 2 Prudential plc Annual Report 1999

5 Prudential plc, through its businesses in Europe, the US and Asia, provides retail financial products and services and fund management to many millions of customers worldwide. Our commitment to the shareholders who own Prudential is to maximise the value over time of their investment. We do this by investing for the long term to develop and bring out the best in our people and our businesses to produce superior products and services, and hence superior financial returns. Our aim is to deliver top quartile performance within the FTSE 100 in terms of total shareholder returns. At Prudential our aim is lasting relationships with our customers and policyholders, through products and services that offer value for money and security. We also seek to enhance our company s reputation, built over 150 years, for integrity and for acting responsibly within society. R Prudential Europe has formed strategic alliances with CNP Assurances, France s largest life company, and Signal Iduna, one of Germany s leading life and health insurers. The agreements cover the provision of co-branded products and the potential to access distribution networks for each company, in France, Germany and the UK. Jackson National Life (JNL) was acquired by Prudential in 1986 and is one of the leading writers of individual life insurance and annuities in the US, providing products and services in all 50 states. It employs 1,700 people and distributes its products through independent agents, broker dealers and financial institutions. Prudential Corporation Asia (PCA) has operations in 11 countries in Asia. Its 20,000 managers, staff and agents develop and sell a range of insurance and investment products tailored to the needs of each local market. Prudential plc Annual Report

6 Chairman s Statement I am pleased to announce very good results with new business achieved profits (our key indicator of value added for our long-term insurance business) up 46 per cent and a record in-flow of new funds of over 18 billion. Growth in our UK businesses has been strong, Jackson National Life in the US has put in another impressive performance and our Asian business has continued its rapid growth. Given our confidence in the business, the Board has decided to increase the total dividend by 9.5 per cent to 23.0 pence per share. We have risen to the challenges which the increasingly competitive environment presents: we have increased our product range, expanded our distribution capabilities hugely, grown our business in the UK and the US and taken it further into Asia. This year we acquired M&G Group P.L.C. (M&G) perhaps the most highly regarded name in the retail unit trust field. We have successfully integrated M&G with the rest of the UK business and are capitalising on the synergies that exist between it and our other operations. Our move into mainland Europe, with the announcement of our new partnership agreements with CNP Assurances in France and Signal Iduna in Germany, is also significant. This provides us with a foothold in markets that will be of increasing importance over the coming years. In just over a year, egg:, our internet bank, has become established as the UK s leading e-commerce provider of financial services and the brand has become a household name. This is a fine achievement. The arrival of Stakeholder Pensions in the UK next year is a further change which will benefit people who traditionally have had difficulty accessing a suitable pension. The internet will also grow in its reach and effect. It is already bringing transparency to all markets. Our task is to respond to customer needs more readily than ever before. There have been, of course, the issues associated with the mis-selling of personal pensions in the UK, which affected the whole industry and are not yet fully behind us. Rectifying cases has absorbed considerable resource in 1999; there has been an increase in provision for future costs of 0.6 billion and an increase in cumulative costs paid to date of 0.1 billion. We now estimate the total cost of pension mis-selling to be 2 billion. We are determined to do whatever is required to ensure that none of our customers lose out and that such a situation will not happen again. The scale and pace of change and the success of the company would not have been possible without the professionalism, dedication and sheer energy of our staff around the world. My sincere thanks are due to all of them and my best wishes for the future go with them. At this year s Annual General Meeting we shall be bidding farewell to Michael Abrahams, a director since 1984 and Deputy Chairman since He leaves with our sincere thanks and best wishes. I would also like to pay tribute to David Gillmore who died early in the year. Lord Gillmore served on the Board for four years and in that time he made an invaluable contribution to the company especially through his extensive knowledge of Asia. I have been pleased to welcome to the Board several new members: Bridget Macaskill, Chief Executive Officer of OppenheimerFunds Inc., Rob Rowley, Finance Director of Reuters Group plc, and Mark Tucker, Chief Executive of Prudential Corporation Asia. More recently I welcomed Sir Roger Hurn as a director. I am sure that they will all make a valuable contribution to our activities. Finally, I want to pay tribute to Sir Peter Davis who has been Group Chief Executive of Prudential for the past five years and who has led a remarkable transformation within the company. I welcome Jonathan Bloomer as his successor. Jonathan, as Finance Director and more recently as Deputy Group Chief Executive, has worked closely with Peter since 1995 on the development of our strategy. I will retire at this year s Annual General Meeting in May and am delighted that Sir Roger Hurn has agreed to succeed me as Chairman. I have every confidence that the company is in safe hands and that it is well equipped to meet the challenges of the future. Sir Martin Jacomb Chairman 4 Prudential plc Annual Report 1999

7 We have increased our product range, expanded our distribution capabilities hugely, grown our business in the UK and the US and taken it further into Asia. Sir Martin Jacomb, Chairman

8 All parts of the group are making rapid progress in making e-commerce integral to the way we do business. Jonathan Bloomer, Group Chief Executive

9 Group Chief Executive s Review 37% 27% 51% 25% Over the past 12 months we have made considerable progress towards delivering our strategic objectives in the UK, the US, Asia and Europe. We have taken forward our programme of restructuring and re-engineering our existing operations while investing and developing new businesses. This strategy has helped us to maintain our leadership position in a rapidly changing financial services sector. By harnessing new technology we have been able to maximise development and efficiencies across all areas of our business. This focus on technology gives our customers better access to our business, higher levels of customer service and drives down unit costs. These developments, coupled with our diversified product range and increased distribution capability, have resulted in a record in-flow of more than 18 billion of new funds in In the UK we have made important progress in developing new business models for our retail insurance business and in growing our Independent Financial Adviser operations. We bought M&G Group P.L.C. (M&G) and are integrating it successfully with Prudential Portfolio Managers (PPM) in the UK. We believe that the global trend towards increased sales of investment products will continue and this move allows us to focus on those areas of fund management where we have unique strengths and competitive advantage: unit trusts, fixed income and pooled life and pension funds. This acquisition has increased the group s retail fund management presence greatly and since acquisition M&G has produced a 20 per cent increase in sales over the equivalent prior year period. We have been delighted with the progress of egg:. Since its launch in 1998, egg: has become established as a household name and one of the UK s most recognised e-commerce brands. We continue to invest in egg:. To enhance the future development of this business and to maximise long-term value for our shareholders, we have decided to pursue a plan for an initial public offering (IPO) of a minority stake in egg: subject to continuing progress in the business and favourable market conditions. It is currently intended that an IPO would take place later this year. We are determined to do all that we can to accelerate the growth of egg: and consolidate its UK market position as the leading internet financial services provider. In order to do this we need to be able to attract outstanding talent, create a currency for purchasing other internet properties and services, increase the transparency of the business and increase accountability. An IPO represents the most effective way of achieving those objectives. Internationally we have extended our reach has been a significant year for our Asian operations. We are the first UK company to be granted life licences in China and Vietnam; we have also made a major acquisition in Taiwan and signed a significant joint venture agreement in Hong Kong. In the US, Jackson National Life continues its strong performance with record sales and profits. At the end of 1999, we formed Prudential Europe and secured strategic alliances in France and Germany, giving us footholds in markets with considerable growth potential. We continue to make good progress in implementing our managing for value programme across the group. Each business has clear value creation goals with management reward based upon their delivery. Prudential plc Annual Report

10 Group Chief Executive s Review continued Our industry is going through dramatic change. In the areas of the world in which we are operating we are witnessing rapid consolidation. We have been changing too and are now a very different company from the one I joined five years ago. I believe that we will need to change, to at least the same extent, over the next five years. One of the most powerful and potent forces of change is our customers. They are taking charge of their own futures in a very visible way. They know that they have to make provision for their own financial security and are tackling the task with energy and intelligence. They need and want value-for-money products which work for them. This puts the onus on us to deliver products which perform, which meet consumers needs and which are very easy to understand. We know that our customers can shop around and that they will do so unless we offer the best products and services at the right price. Not at all surprisingly, governments are very supportive of consumers taking responsibility for their finances. In the UK this has, this year, led to the proposed creation of Stakeholder Pensions. Stakeholder Pensions will be available from 2001 to people on lower incomes, to those who hitherto have been unable to access corporate pension schemes and to spouses who are not active in the workplace. The UK Government also want them to be very affordable. To achieve this, costs have to be reduced both by the producers and by developing industry-based employer groups. At Prudential we are comfortable with this framework and have already invested time and resource to design models which will deliver this proposition to customers. The strides we have made in the development and use of new technology and the economies of scale offered by an operation of our size, lead to a tremendous opportunity for Prudential and its customers to benefit greatly from this new environment. We are also very aware that our industry has not always been the most dynamic in recent years. The number of new entrants who have come into our market has been a wake-up call to the traditional players. It has opened up the market to greater competition and to new ideas that benefit the consumer. So that we can stay ahead of this competition, we have been very active over the past three years in re-shaping and re-engineering our businesses in the UK and US. We have also sought new platforms in Asia and Europe. We want to be the company people turn to for the right products in whatever way they prefer to be served. One of our big successes has been egg: : through which we have created and built our own new entrant on a vision of designing products and a service which treats our customers as they want to be treated. To stay ahead of the curve we have invested considerably in new technology. We were faster off the mark than others in the UK with our investment in egg: and all parts of the group are making rapid progress in making e-commerce integral to the way we do business. Scottish Amicable and Jackson National Life both have extranets offering intermediaries self-service. Prudential Group Pensions is developing a distribution system that exploits e-commerce technology. Prudential Retail Financial Services has rolled out laptops to the direct sales force and general insurance customers can obtain quotes and take out policies on-line. In Singapore, our sales force can now use laptops to approve applications and can verify signatures 8 Prudential plc Annual Report 1999

11 digitally one of the first companies in the world to be able to do so. In the US, Jackson National Life has a comprehensive IT programme which has not only increased levels of customer service, but has reduced costs dramatically. In the past few years we have consistently delivered superior investment returns to our shareholders. We will continue to maximise the value from our existing businesses and invest for the future. With a strong management team we are ideally placed to continue to deliver long-term out-performance. On a personal note, I am delighted to become Group Chief Executive of this remarkable company at such an exciting time in its development. In Sir Peter Davis I have a hard act to follow and I would like to pay tribute to Sir Martin Jacomb who retires at the Annual General Meeting. He has given great guidance and support in a period of dramatic change. The challenges will be great, but the dedication and professionalism of our staff and the commitment of our Board mean that these are challenges to which I look forward and to which I know we will all rise. Jonathan Bloomer Group Chief Executive Prudential plc Annual Report

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13 Delivering quality and value ,565 7,032 6,694 4,327 1,381 egg: and Prudential Banking In little more than a year, egg: has become established as a household name and one of the UK s most recognised e-commerce brands. Our strategy of offering some of the most competitive and customer friendly products in the market, delivered using the latest in internet design and technology, has resulted in an egg: customer base of 940,000 and deposit funds of 7.6 billion at the year end. This remarkable growth has exceeded our initial business targets and egg: is regarded as the UK s leading e-commerce financial services website. By late February the combined Prudential Banking and egg: mortgage book stood at 1.7 billion, of which 452 million is egg: mortgages, while egg: personal loans have reached 227 million. Through egg: we have been able to reach a new type of customer, one who is computer literate and financially discerning and who wants to benefit from the combination of the best financial products the market has to offer, and who uses internet services which fit in with their lifestyle. The growth in the number of customers using our website is spectacular. In July 1999 we had 184,000 visitors to the egg: website and in January 2000 that figure rose to 1.1 million. In January, 62 per cent of all egg: s deposit transactions took place over the internet and 86 per cent of mortgage applications were via the internet. Our hi-tech communication centres in Dudley and Derby continue to take some 60,000 calls and 11,000 enquiries from customers each week. Our innovative working practices and specially designed employee training programmes all lead to a unique egg: culture and customer experience. Building on the success of its core savings and loan products, egg: launched an internet credit card in September 1999 which now has over 250,000 account holders. Credit card customers benefit from market-leading rates and a guarantee against internet fraud. We also offer an on-line shopping zone which offers some of the best value retail consumer products available. We have previously announced our intention to launch a new on-line unit trust supermarket which will give egg: customers access to investment funds offered by leading investment houses, as well as an on-line share-dealing service. We are capitalising on the strengths of on-line services to ensure that egg: remains at the forefront of technological development and will continue to do so as our range of innovative products and services continues to expand. During 1999 our investment in egg: totalled 150 million and we expect a similar level of investment during We anticipate that with its current plans and activities, egg: will be breaking even in the latter part of 2001 as the benefits of the customer base and cross-buying materialise. The intent to pursue plans for an IPO, subject to continuing progress in the business and favourable market conditions, represents the best option for the accelerated development of egg: and for the maximisation of long-term shareholder value of Prudential. It will create greater financial flexibility for egg:, will facilitate growth by giving it the ability to undertake acquisitions through the use of internet paper, and it will help to recruit, incentivise and retain high calibre staff. Prudential plc Annual Report

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15 Flexibility and control 1,885 1,242 1, Prudential s UK retail insurance operations comprise three businesses: Retail IFA, Prudential Retail Financial Services and Prudential Annuities. Retail IFA Our Retail IFA business produces and sells Scottish Amicable and Prudential branded products, including the market-leading Prudence Bond through Independent Financial Advisers (IFAs). Underlying statutory profit (before re-engineering costs) from our Retail IFA business increased by 13 per cent to 99 million in 1999 while new business achieved profit increased by 53 per cent to 174 million. This strong growth in new business achieved profit has been driven by increased sales of investment bonds, predominantly Prudence Bond, with sales of 1.9 billion in Central to this growth has been the further improvements that we have initiated in customer service. During the year we have given customers a choice of fund manager and re-engineered the distribution process to give a stronger match between the specialisations of each IFA and Scottish Amicable s sales force. The choice of fund managers was launched under the Power to Choose banner and has been widely welcomed by IFAs. It is a concept which competitors are now following. In addition we have also developed a new sales contact centre which will lead to even higher levels of customer service. We are continuing to expand operations at our Craigforth site near Stirling, where the total number of staff employed is now close to 2,300. During 2000, this will be increased further as we transfer the administration of M&G s life and pensions business from Chelmsford. Scottish Amicable s high standards of customer care were recognised in the 1999 Financial Adviser Awards where it received five star awards for customer service in both the Life and Pensions and Investments categories. We were also voted most admired IFA company by readers of Financial Adviser. Prudential Intermediary Division and the IFA Service Centre were again voted best providers by the Bradford and Bingley Building Society, their largest supporting IFA. In addition, several products were recognised with industry awards, including Prudence Bond, Home Purchaser (our mortgage endowment product) and our Long-Term Care Bond. During 1999, we refocused our marketing efforts and developed a campaign which targeted both consumers and financial advisers, raising brand awareness and stressing the importance of professional financial advice. Our activity included television sponsorship, national press advertising, radio commercials and London Underground advertising. Our investment in technology will enable continued improvements to customer care, under both the Scottish Amicable and Prudential brands, and will increase the cost-effectiveness of the business adding to shareholder value. These developments include an extranet giving IFAs the latest information on products and services. In addition, new business processing developments will allow IFAs to administer pensions on-line. We continue to expand the range of products designed to meet the changing needs of IFAs and introduced a Stakeholderfriendly group personal pension product on 1 March Prudential plc Annual Report

16 At one with our customers 1,817 1,562 1,718 1, Prudential Retail Financial Services Prudential Retail Financial Services (PRFS) comprises three business units: Prudential Retail (with its 1,900 strong direct sales force), Life and Pensions and General Insurance. PRFS has six million UK customers to which it sells a comprehensive range of personal investment and insurance products. Currently PRFS has 7.1 million life policies in force and is one of Britain s biggest pension providers with 1.6 million personal pension contracts. It also sells banking products for Prudential Banking: mortgage sales exceeded 600 million in Sales of insurance and investment products rose by 16 per cent to 1.8 billion despite a 40 per cent reduction in the number of sales force consultants. This result reflects the success of our initiatives to increase efficiency and improve consultant productivity. Single premium sales were up 22 per cent at 1.7 billion, reflecting higher sales of with-profit savings products, fuelled by the low interest rate environment. Regular premium sales were down 24 per cent to 146 million, mainly due to lower sales of pension products. Underlying long-term business statutory profit rose nine per cent to 319 million and underlying general insurance profit increased 56 per cent to 61 million. Achieved new business profit on long-term business was up 20 per cent to 83 million. During 1999, we re-engineered the structure of PRFS to broaden its appeal to customers and to reduce its cost base in anticipation of an even more competitive financial services environment. Significant progress towards this goal has been made through a programme to remove some 5,000 jobs over three years, 3,000 of which have been accounted for over the last year. Our investment in new technology will support these efforts and will make the sales process more efficient by reducing the administrative burden. In addition the move towards remote working, with no branch infrastructure, has been made possible by introducing laptop computers as a tool for the sales force. This will lead to a greater focus on advising customers and increasing productivity. We are also harnessing technology to develop higher levels of interactivity with our customers. We have launched our new-look website to inform customers about our products and to enable customers to arrange visits by financial consultants. We are currently testing a system which will provide on-line advice in real-time with a consultant and general insurance customers can now obtain quotes and take out policies on the internet. Prudential Annuities Prudential Annuities is the market leader in the UK pensions annuity industry which is projected to grow strongly over the next few years. We now have over 700,000 customers and more than a 20 per cent share of new business in Total sales were 2.2 billion and funds under management now exceed 10 billion. In the individual pension annuity market, with-profit sales have shown strong growth and now represent more than 15 per cent of individual sales. Bulk annuity sales in 1999 represented more than half our total sales and were boosted by two big sales totalling 1.1 billion in July. 14 Prudential plc Annual Report 1999

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18 Value through technology Prudential Group Pensions Group Pensions forms an increasingly significant part of Prudential s business. We are a leading provider of employer sponsored pension schemes, meeting the pension needs of many large companies. We administer 3,200 defined contribution schemes with a total of some 400,000 members, and 275 defined benefit schemes comprising some 130,000 members. During 1999, Group Pensions statutory profit rose 64 per cent from 22 million to 36 million while new business achieved profit was up 30 per cent to 26 million. The Government s proposal to introduce Stakeholder Pensions in 2001, and in particular the limiting of fees to a one per cent annual management charge, offers both a major challenge and a significant opportunity. The challenge for providers is to develop more economic methods of servicing and distribution. At the same time, the growth of this new Stakeholder market, together with the continuing shift towards flexible defined contribution arrangements, offers Group Pensions an opportunity to deliver significant shareholder value through simple, value-for-money products and services. Prudential s response to the Government proposals has been positive: we aim to combine first class customer service with operating efficiencies to make Prudential a low-cost and profitable participant in the emerging Stakeholder environment. Two specific initiatives have been taken to exploit these market changes: a marketing and distribution platform has been developed, that employs current e-commerce and future broadband technology to its fullest advantage. Designed to maximise participation by giving employees access to pension information through their company s intranet and at home, it has the added benefit of providing a strong education capability to enable users to understand and manage their pensions better; secondly, we have improved the distribution efficiency of our Additional Voluntary Contribution (AVC) product by moving away from one to one sales to a new approach based on communication teams visiting the workplace and informing members of the pension choices available to them. This strategy reinforces our move away from the traditional sell approach to a buy service that complements our e-commerce proposition. Going forward, these and other initiatives build on Prudential s already highly respected brand and will enable us to capitalise on market changes, to deliver both customer value and strong shareholder returns. 16 Prudential plc Annual Report 1999

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20 Strength and security Prudential M&G Asset Management Prudential s fund management business in the UK is conducted under the umbrella of Prudential M&G Asset Management. The acquisition of M&G Group P.L.C. (M&G) in April 1999 has given us enhanced access to the retail investment market and we are currently carrying out a fundamental reorganisation of our fund management operations. In the UK we will specialise in those areas of fund management where we have unique strengths and competitive advantage unit trusts, fixed income and pooled life and pension funds. We have therefore entered into discussions, which are now at an advanced stage, to sell our UK institutional segregated balanced and specialist equity business which constitutes around 10 billion of mandates (out of a total group funds under management of 170 billion). At the same time we are bringing Prudential Portfolio Managers (PPM) and M&G together into a unified business. We will combine the investment processes and resources of both in a single new management structure under Michael McLintock as Chief Executive. We have already successfully completed the merger of the fixed income teams (creating the largest fixed interest team in the UK, with funds under management of 33 billion), as well as the two retail administration centres. In addition we are in the process of moving M&G s life and pensions business to Craigforth under the management of Scottish Amicable. Overseas, PPM s principal operations in the US and Asia have been re-aligned to report alongside the local operations to maximise the synergies between the investment process and retail product manufacturing and distribution. Prudential Portfolio Managers PPM manages 145 billion worldwide, mostly on behalf of Prudential s internal clients. Underlying profit for PPM totalled 43 million in 1999, in line with the previous year. PPM s strong equity weighting helped the Life Fund outperform its competition by an estimated three per cent to four per cent. PPM Property, the UK s largest property investor with a portfolio valued at over 9 billion, has had a particularly successful year. We made significant investments at Bluewater and Milton Keynes shopping centres and agreed the sale of our entire rural estate to the Duchy of Cornwall. We opened the first building on GreenPark in Reading, our major business park under development, and plan to upgrade and extend the Arndale Centre in Manchester, where our development represents a large part of the city centre redevelopment. PPM Ventures (PPMV) also had an excellent year, delivering strong returns to clients and a record operating profit of 11 million. At the year end, PPMV had invested capital of 600 million, with investments made on behalf of the Life Fund and external pension fund clients. During the year PPMV delivered continued growth in Europe and the Asia-Pacific region with a total of 160 million invested in 13 new private equity transactions in Europe, Asia and Australia. Our London and Paris teams led five European transactions with a combined deal size of 220 million. The Sydney and Hong Kong teams completed eight transactions, including an investment in the management buy-out of Mando Climate Control Corporation, one of the largest private equity deals in Asia in Prudential plc Annual Report 1999

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23 Funding for the future *M&G acquired April 1999 M&G We purchased M&G Group P.L.C. (M&G) to enhance the group s retail fund management presence. M&G is the oldest and largest retail unit trust manager in the UK and has a very strong brand. Performance in its first eight months since acquisition has been strong, with sales of 583 million and underlying profit of 56 million both ahead of acquisition assumptions. At the end of 1999, M&G had 21 billion of funds under management. At the time of purchase we stated that we believed that the unit trust market would grow by 21 per cent compound over five years. Those estimates have been already superseded with the market growing by 39 per cent in the first year. This confirms completely our view of retail fund management as a strong growth market. M&G embraced Individual Savings Accounts (ISAs) from the outset. Taking full advantage of the changes in regulations which allow customers to invest by telephone or internet, we are one of only a handful of companies that give investors the chance to buy an ISA on-line. Sales of ISAs, through both the intermediary and direct channels, have been good since launch, securing a five per cent share of the unit trust ISA market. In 1997 we redesigned our investment process in order to create a more diversified fund range and greater investment flexibility within the fund management team. These efforts have resulted in a broader range of offerings, including growth, fixed interest and themed funds, and are now delivering better performance from the traditional M&G equity income funds. During 1999, we introduced innovative products, including the M&G Global Managed Bond Fund and the M&G Global Technology Fund, to strengthen M&G s reputation in the retail market. In November we reduced the annual management charge on our UK Index Tracker from 0.75 per cent to 0.3 per cent resulting in a six-fold increase in the daily rate of sales. In the last quarter of 1999, sales through the internet increased dramatically and, as we enter 2000, six per cent of our direct business is sold via the internet. We will be making a substantial investment in our systems over the next three years. The project will create an efficient and uniform system for collective investment vehicle administration and a platform for operating in an electronic environment. Prudential plc Annual Report

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25 New markets,new opportunities % France Germany % France European average Germany Source: Datamonitor: Taking Advantage of Opportunities in the Retirements Savings Market in Europe, 1999 * Note: For France this asset class consists of insurance investment certificates (Livre A contracts), a form of tax free savings account Source: Donaldson, Lufkin & Jenrette: Pan-European Insurance Industry Compendium, 16 November 1999 Prudential Europe The single market and the impact of technology and major demographic shifts are bringing about unprecedented change in the savings and investment markets of continental Europe. These, coupled with the lowering of barriers to cross-border trade within the EU, mean that we have been able to create a new business model to develop the opportunities that are emerging for retail financial services in continental Europe. In a low inflation, low interest rate environment, continental European savers are already buying increasing quantities of equity-based savings products. Products of this kind are recognised areas of strength for Prudential and European legislation now enables products originating in one EU country to be marketed and sold on a cross-border basis. Our strategy for continental European retail markets involves harnessing existing product resources and tailoring them to individual market needs. Whilst meeting local presentational, fiscal and regulatory requirements, the basic core products will be the same in each market and be produced in a single location. We will be distributing through a series of non-exclusive strategic partnerships with leading local financial services providers. Our products will be branded or co-branded Prudential. In November 1999, we announced partnerships with CNP Assurances in France and Signal Iduna in Germany. In forging links with France s leading life assurer and one of Germany s major insurance providers, we have gained access to local markets and marketing expertise and large scale distribution networks. Our strategic partnerships include the sharing of technical expertise and the consideration of joint ventures both in the respective home markets and elsewhere. We will launch the first new products for distribution in France and Germany later this year. In the meantime, we continue to develop our German broker business based in Frankfurt where we have already established a leading position in the new but rapidly-growing unit linked market. Whilst, in the short term, retail savings and investment products are our main focus, in the longer term, the provision of funded pensions both on an individual and a group basis will be a major market opportunity. In addition, we will distribute products through the local equivalents of independent financial advisers and insurance brokers. The next major markets for implementing our strategic partnership approach are Italy and Spain. We will develop plans for these markets during the course of this year. Prudential plc Annual Report

26 R It s all about creating access US Operations Jackson National Life (JNL) is one of the top 20 life companies in the US. Its product range encompasses traditional fixed annuities, variable annuities, equity-linked indexed annuities, stable value Guaranteed Investment Contract (GIC) business and life assurance products. JNL continues to go from strength to strength with record profit and sales in Statutory profit has risen ten per cent to 451 million (after including a 6 million investment in building JNL s broker-dealer operations and PPM America) with single premium sales 43 per cent ahead of 1998 at 4.1 billion. Annuity sales of 2.4 billion were 65 per cent ahead of the prior year while GIC sales totalled 1.6 billion. Sales of variable annuity products were nearly 1.2 billion, more than double 1998 s figures. This compares with industry growth over the same period of 21 per cent. Equity-linked indexed annuity sales surpassed expectations and reached 431 million, 52 per cent above 1998 levels. By the end of 1999, JNL ranked as the largest provider of equity-linked indexed annuities in the US. Our fixed annuity sales also rose by 23 per cent, keeping us at second in that market. We have enhanced our distribution capability dramatically by the introduction of new technology in a programme entitled JNL-2-YOU. The programme provides 24 hour access to account balances, premium receipts, net policy values and other information either by telephone or by internet. In the next stage of development, the full range of JNL s products will have such access including the full complement of indexed and variable annuity products as well as life insurance and traditional fixed annuities. We plan to launch new services, including on-line transactions, customised illustrations and presentations services previously available only on interactive CD-ROMs. By investing in new technology we have not only improved the service experienced by customers, but have brought about a dramatic financial impact: the cost of a typical call from a customer has been reduced from US$5 to between cents for an automated phone call, and five cents for an internet hit. During 2000, JNL s conversion to one system-wide computer platform will give us the processing capability to connect even more effectively with the internet, opening new doors for customer service. Our Lansing and Denver Service Centres have processed 60 per cent more applications and service requests than in Additionally, our Institutional Marketing Group service centre won several awards and was judged best in the industry for fixed annuity service and marketing support, including two prestigious Crystal Pyramid awards. Construction of our new US$50 million headquarters building continues and we expect to occupy it this autumn. Jackson Federal Bank, the savings and loan institution purchased by JNL in 1998, was able, thanks primarily to our ownership, to upgrade its industry ratings. With the higher ratings, we will be in a very favourable position to expand and build the Thrift in PPM America, the fund management company, now reports alongside JNL to Bob Saltzman in order to maximise the synergies between the investment process and product creation and delivery. 24 Prudential plc Annual Report 1999

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29 Success is all about people Prudential Corporation Asia 1999 was a year of significant progress for our Asian business, Prudential Corporation Asia (PCA). We added operations in three countries, and now operate in eleven. Our existing Asian operations had a very good year with total insurance and investment product sales of 871 million being four times higher than last year. New business achieved profit, which reflects the value added to the group from new insurance business, increased 61 per cent on 1998 to 90 million. Statutory operating profit before development costs for 1999 was up 17 per cent to 27 million; operating profit after development costs totalled 15 million. In 1999 we were granted a life licence in China and in December, signed a memorandum of understanding to undertake a life insurance partnership with China International Trust and Investment Corporation (CITIC) in Guangzhou. This will be the first Sino-British life insurance operation. With a population of seven million people in Guangzhou alone, this clearly represents a significant opportunity for us. During November we acquired a majority stake in a top ten life insurance company in Taiwan, giving us access to one of the region s major retail financial services markets. The company has been launched already as Prudential Taiwan and significant expansion plans are being put into place. Within Hong Kong we have entered into a joint venture agreement with Bank of China to provide pension products to Hong Kong residents through the Mandatory Provident Fund a compulsory pension scheme to be introduced later this year. under management as at 31 December It has rapidly become a market leader with a reputation for sound investment management, innovative products and excellent customer service. Prudential Vietnam was launched in November We are the first EU company to be operating in the new Vietnamese life market. Agency teams are already in place in Hanoi and Ho Chi Minh and the early signs are very encouraging. We continue to pioneer the introduction of unit linked products around the region and this year became the first company to launch regular premium unit linked products in Malaysia. We have also been at the forefront of new developments in distribution through our bancassurance partnership with Standard Chartered Bank in Hong Kong and Singapore. On the technology side, Prudential ICICI has been pioneering internet applications for its customers, including non resident Indians, who are now able to transact over the web. Prudential Singapore s website has been ranked best in the market as policyholders are able to check unit prices and access their policy details. We have also begun rolling out laptop software which enables customers to complete and sign proposal forms electronically. This is one of the world s first applications of digital signature technology. The management of our fund management operations, PPM Singapore and PPM Hong Kong, together with our new operation in Japan, are now more closely aligned to our Asian operations, reporting directly to Mark Tucker, Chief Executive of Prudential Corporation Asia. In India, our joint venture unit trust company Prudential ICICI grew by 550 per cent, reaching 453 million funds Prudential plc Annual Report

30 Group Financial Review Financial Summary 1999 m 1998 m Statutory basis operating profit* Before tax After tax Earnings per share 29.1p 33.7p Achieved profits basis operating profit* Before tax 1,098 1,011 After tax Earnings per share 39.1p 38.7p Dividend per share 23.0p 21.0p Shareholders funds Statutory basis 3,424 3,249 Achieved profits basis 8,342 7,510 * Before amortisation of goodwill Continuing operations including acquired businesses Modified Statutory Basis Results Operating profit before amortisation of goodwill totalled 776 million in 1999, a decrease of ten per cent over prior year. The 1999 result includes an investment of 150 million in egg: and a 70 million charge for UK re-engineering costs. Underlying operating profit before these items is up six per cent to 996 million. This underlying increase reflects good growth from our US operations and our UK Retail Insurance business. These increases were offset by the funding costs of egg: and of M&G, which was acquired in the first half of the year. Our US operations generated a profit in 1999 of 451 million, ten per cent ahead of prior year reflecting increased spread income due to a growth in the liability book, and a slight strengthening of the dollar against sterling (local currency results were up eight per cent on prior year). The after tax return on capital for the year of 17 per cent is again ahead of our long-term target of 15 per cent. However, we would expect 2000 s returns to be closer to our target return. In the UK, underlying profit before re-engineering costs from our Retail Insurance Operations increased by 14 per cent to 479 million. Within this total, underlying profit from our Retail IFA business of 99 million was 13 per cent above prior year as increased funds under management more than offset the impact of lower annual bonuses. The 14 per cent increase in profit from Retail Financial Services and Annuities to 380 million reflects a 56 per cent increase in profit from general insurance to 61 million, and a nine per cent increase in long-term profit to 319 million. The increase in the long-term result reflects higher funds under management and an exceptional level of maturities which offset the impact of the rundown in annual bonuses. Despite recent rises in interest rates, expectations are for continued low inflation and investment returns and we would therefore expect to see a continued downward trend in annual bonus levels. The significant improvement in the general insurance result reflects better claims and expense experience. Prudential M&G Asset Management s underlying result of 87 million compares with 28 million in 1998 and includes a strong first time eight month contribution from M&G of 56 million. M&G s result is ahead of our original acquisition assumptions. The contribution from PPM of 43 million is in line with last year. The investment in egg: and Prudential Banking is 150 million compared with 77 million in This increase reflects both the success of the venture with the resultant demand for additional capacity, and increased investment in the e-card launch, development of future products and the continued investment in systems. Given the continued development expenditure and proposed new initiatives, we expect a similar level of investment for 2000 to that incurred in We anticipate that with its current plans and activities, egg: will be breaking even in the latter part of 2001 as the benefits of the customer base and cross-buying materialise. 28 Prudential plc Annual Report 1999

31 1999 m 1998 m % Retail IFA PRFS and Annuities 1O Group Pensions Total UK Operations 3O Jackson National Life Prudential Corporation Asia 9O Prudential Europe New Business Achieved Profits Weighted New Business Total 6O UK and Europe JNL Asia New business The movement in other income and expenditure from income of 38 million in 1998 to a charge of 78 million in 1999 predominantly reflects the cost of funding the acquisition of M&G and the investment in egg:. Operating earnings per share were down 14 per cent on prior year at 29.1 pence. This fall is higher than the ten per cent fall in operating profit due to the unusually low effective tax rate in 1998 of 25 per cent, compared with 27 per cent in Supplementary Achieved Profits Basis Results On the achieved profits basis of reporting, operating profit was 1,098 million in 1999, nine per cent ahead of This is despite the inclusion of the UK re-engineering charge of 70 million and increased investment in egg: and is due mainly to strong sales performance across the group. Underlying growth excluding these items was 21 per cent. The achieved profits result for our long-term operations was an increase of 27 per cent on 1998 at 1,230 million reflecting a 46 per cent rise in new business profits to 603 million and a 13 per cent increase in in-force profits to 627 million. Within new business profits, the contribution from our UK businesses was up 44 per cent to 304 million. This increase reflected a 53 per cent increase in Retail IFA new business profit to 174 million due to increased sales and a revised assessment of persistency of our Prudence Bond product. Within Retail Financial Services and Annuities, strong sales growth and a shift to more profitable product lines drove the result up 35 per cent to 104 million, while Group Pensions contribution was 26 million, up 30 per cent on Overseas, Jackson National Life generated new business profit of 198 million, up 45 per cent on prior year, reflecting record sales volumes and a shift in product mix to relatively more profitable variable annuity and equity-linked indexed annuity (ELI) products. Prudential Corporation Asia s contribution of 90 million represents another very strong result, up 61 per cent on prior year, and is primarily attributable to the increase in sales in our established markets, a more profitable sales mix and our increased stake in Malaysia. Prudential Europe s contribution was 11 million, up 22 per cent on Profit from long-term in force business of 627 million compares with 557 million in The 1999 result was held back by the shareholders charge of 92 million for the increase in the cost of pensions mis-selling in the UK. We have increased the provision for pensions mis-selling from 1.1 billion to 1.7 billion and, including amounts already paid, we now expect the total cost to be 2 billion. The increase in the provision reflects the impact of the revised, shorter, timescale for dealing with Phase 2 cases, revised settlement and interest rate assumptions and additional Phase 2 cases. The returns on average shareholders funds for our long-term businesses based on local currency achieved basis operating profit after tax, are shown in the following table: 1999 % 1998 % UK operations Jackson National Life Prudential Corporation Asia* * Established operations net of development costs Total operating profit after tax on the achieved profits basis was 762 million and earnings per share were 39.1p. A full description of the achieved profits methodology and the result for the year is included on pages 76 to 82. Prudential plc Annual Report

32 Group Financial Review continued Accounting Policies There have been no changes in accounting policies during the year that impact materially on the results. Dividend Given the progress made by the company in 1999 and the confidence in the future success of the business, the Board has increased the total dividend for the year by 9.5 per cent to 23.0p per share. Dividend cover is 1.3 times based on statutory operating profit after tax before amortisation of goodwill. Shareholders Funds The consolidated balance sheet on page 53 shows statutory basis shareholders funds of 3,424 million at the end of 1999, an increase of 175 million from The increase primarily reflects the profit retained after dividend payments. On the achieved profits basis, which recognises the shareholders interest in our long-term businesses, shareholders funds were 8,342 million, an increase of 832 million compared with The increase reflects the profit retained in the long-term businesses and strong investment returns. After adjusting for borrowings, approximately 65 per cent of these funds are held in sterling with a further 25 per cent held in US dollars. The achieved profits basis provides a better indication of the group s financial strength. It does not, however, anticipate the results of our discussions with the FSA on the unattributed assets held in the main with-profits fund. For the purposes of the achieved profits basis results, it is assumed that only ten per cent of these assets are allocated to shareholders. Our discussions with the FSA on the unattributed assets continue. The achieved profits basis shareholders funds are analysed in the following table: 1999 m 1998 m UK operations 5,029 3,911 US operations 2,533 2,166 Asia Europe Other operations 119 1,009 Achieved profits basis shareholders funds 8,342 7,510 Financial Strength of Insurance Operations The solvency ratio of free assets to liabilities within the group s main UK long-term fund at the year end after charging for the pension mis-selling provision is estimated to be 29 per cent, an increase of eight per cent over prior year. The fund s financial strength has been rated Aaa by Moody s Investors Service. The solvency position of Jackson National Life remains strong with a risk-based capital ratio of over 240 per cent of the regulatory minimum. Adequate solvency levels have been maintained by our insurance operations in Asia. Funds Flow The table below provides details of the holding company s funds flow: 1999 m 1998 m Group operating profit before amortisation of goodwill after tax Dividends (449) (407) Reinvested in businesses (278) (260) Funds available to holding company (160) (13) New investment in businesses (2,320) (265) Capital repatriated from businesses 310 Disposal of businesses 481 Timing differences and other items (98) (160) Holding company net cash movement (2,268) Prudential plc Annual Report 1999

33 We believe that for an insurance group this presentation provides a clearer demonstration of the utilisation of resources than the format prescribed under FRS1 shown on page 55. In 1999 the group s operations generated funds after tax of 567 million, compared to 654 million in 1998, and retained funds after dividends were 118 million. In 1999, the group invested 2,598 million in its businesses including 278 million reinvested in Jackson National Life and 1,943 million relating to the acquisition of M&G. We have also invested 262 million regulatory capital in Prudential Banking and egg: and 97 million in Asia, principally in Taiwan. In addition, 310 million was repatriated from businesses in 1999: 190 million of surplus capital from M&G, and 120 million from Prudential Assurance Company, following a review of capital requirements. Overall there was a net cash outflow in 1999 from the holding company of 2,268 million. As a result of the above outflow and exchange translation losses of 22 million, the holding company net borrowings at the end of 1999 totalled 1,837 million, compared with 453 million of net cash at the end of Shareholders Borrowings Core structural borrowings of shareholder financed operations at the end of 1999 totalled 1,915 million including 1,446 million at fixed rates of interest with maturity dates ranging from 2001 to 2029, as set out in note 21 on page 68. Of this long-term borrowings balance, 496 million was denominated in US dollars, in order to hedge partially the currency exposure arising from our investment in Jackson National Life. There were also 301 million short-term commercial paper borrowings and 168 million floating rate loan notes, all sterling denominated. The group successfully launched two bonds during the year: a 250 million 5.5 per cent Bond maturing in 2009 and a 250 million per cent Bond maturing in The group also successfully placed 168 million of loan notes due to mature in The proceeds of these debt issues along with the net cash held by the holding company at the end of 1998 were used to finance the acquisition of M&G. Prudential plc enjoys strong debt ratings from both Moody s Investors Service and Standard and Poor s. Its rated long-term debt is Aa3 and AA+, whilst the short-term ratings of its guaranteed finance subsidiaries are P-1 and A-1+. The group also retains access to both committed and uncommitted bank facilities. Treasury Policy The group operates a central treasury function, which has overall responsibility for managing its capital funding programme as well as its central cash and liquidity positions. The treasury function is also responsible for the co-ordination of risk management and investment policy across the group. To reduce investment, interest rate and currency exposures, and to facilitate efficient investment management, derivative instruments are used. Group policy is that amounts at risk through derivative transactions are covered by cash or by corresponding assets. The accounting treatment of derivative contracts is consistent with that of the underlying assets or liabilities. The group transacts business primarily in sterling and US dollars. The currency exposure relating to the translation of reported earnings is not separately managed although its impact is reduced by interest payments on the foreign currency borrowings and by the adoption of average exchange rates for the translation of foreign currency revenues. Prudential plc Annual Report

34 Investing in our communities We recognise that our business activities, and the investments we make on behalf of our customers, have an effect on the environment and the wider community. We believe that corporate social responsibility is an integral part of good business practice, encompassing our relationships with employees, customers, shareholders, suppliers, business partners and the communities in which we operate. In January 2000 we created a new unit to manage our approach to social responsibility. Environment The Environmental Policy Group sets the group-wide environmental strategy and makes recommendations to business units on the implementation of environmental action plans. We are striving to: reduce consumption of materials in our operations help employees to achieve environmental improvement encourage our suppliers to minimise the impact of their operations on the environment make environmental considerations part of our investment decision making apply best practice in the planning, development and decommissioning of our buildings. Derek Higgs holds Board responsibility for environmental policy. He was recently appointed Chairman of Business in the Environment which aims to inspire business to achieve corporate social responsibility by making continuous progress towards environmentally sustainable development an essential part of business excellence. Ethical Investment With investments exceeding four per cent of the overall UK stock market, we have a significant role in putting ethical investment on to the mainstream business agenda. We expect those companies in which we invest to be able to demonstrate and report on appropriate environmental and social policies. We also offer ethical investment products, such as the Light Green Fund, which seeks to balance ethical concerns and investment efficiency for pension scheme members. Prudential Corporation Asia contributed to a rehabilitation centre for children recovering from the Taiwan earthquake Scottish Amicable is working with The Princess Royal Trust for Carers in Scotland and with general practitioners Jackson National Life supports educational and youth projects in Michigan and Chicago through United Way Prudential Portfolio Managers Property Division initiated two programmes to benefit retailers and the wider community: The New Deal Retail Routeway to prepare unemployed people for jobs in retailing Pru Youth Action, a partnership with Crime Concern, to tackle shop theft in shopping centres. We also launched two corporate programmes: 200 for 2000 to recognise the time our employees give to local communities over 100 senior managers mentor head teachers through Business in the Community s Partners in Leadership programme. Diversity We respect and value diversity. To remain competitive we seek to recruit, develop and retain people from the widest range of backgrounds. In the UK we have committed to the Commission for Racial Equality Leadership Challenge and we are members of Opportunity Now and Race for Opportunity. We have established a Diversity Group to stimulate discussions, develop good practice and monitor progress, chaired by Rodney Baker-Bates, Managing Director, Group Pensions. Arts Prudential sponsors Creative Britons, the UK s biggest arts prize with 200,000 going to arts organisations to recognise the outstanding work of arts practitioners. The 1999 winner was Mary Ward, Artistic Director of the Chicken Shed. We also sponsored The Art of Bloomsbury at the Tate Gallery, Verdi s Falstaff, the opening production at the new Royal Opera House, and Gilded Dragons at the British Museum. Community Investment Investing in community partnerships is a fundamental part of our programme. In 1999 we contributed 1.8 million towards community and sponsorship programmes. For example: employees from M&G planned, designed and constructed a new technology classroom for a local school in Chelmsford 32 Prudential plc Annual Report 1999

35 Prudential plc Annual Report

36 Board of Directors Chairman (Age 70) A director since 1994 and Chairman since Chairman of Delta plc. Director of Rio Tinto plc, Marks and Spencer plc, Canary Wharf Group plc and Minorplanet Systems plc. *non-executive director Deputy Chairman (Age 62) A director since 1984 and Deputy Chairman since Chairman of Prudential Staff Pensions, Kingston Communications (Hull) plc, Minorplanet Systems plc and the London Clinic. *non-executive director (Age 45) Group Chief Executive since March Previously Deputy Group Chief Executive since May 1999 and Group Finance Director since Director of Railtrack Group plc. Member of the Urgent Issues Task Force Committee of the Accounting Standards Board. Previously a senior partner of Arthur Andersen. (Age 64) A director since January Deputy Chairman of AstraZeneca plc from April 1999 and previously Chief Executive of Zeneca PLC. Deputy Chairman of Business in the Community and non-executive Chairman of Imperial Cancer Research Technology Limited. Member of the Board of Trustees, British Red Cross Society. *non-executive director (Age 53) A director since 1992 and International Development Director since Chairman of Prudential Europe since September Joined Prudential in (Age 66) A director since Director of Next plc. Council member of the Institute of Directors. Previously a director of Safeway Group plc and a committee member of the Automobile Association. *non-executive director 34 Prudential plc Annual Report 1999

37 (Age 55) A director since Chairman of Prudential Portfolio Managers. Previously Chairman of S.G. Warburg & Co Ltd. Chairman Designate of Partnerships UK and Chairman of Business in the Environment. (Age 61) A director since February Chairman of Marconi PLC (formerly The General Electric Company PLC) and deputy chairman of Glaxo Wellcome plc. Director of Imperial Chemical Industries PLC. Previously Chairman of Smiths Industries plc and a director of SG Warburg Group and of Pilkington. Chairman of the Court of Governors at the Henley Management College. *non-executive director (Age 51) A director since May President and Chief Executive Officer of OppenheimerFunds Inc, a New York based investment management company. *non-executive director (Age 50) A director since July Finance director of Reuters Group PLC. *non-executive director (Age 66) A director since Chairman of Murray Extra Return Investment Trust plc and of the Scottish Amicable (supervisory) Board. Previously a practising solicitor and Chairman of Scottish Amicable Life Assurance Society. *non-executive director (Age 42) A director since September Chief Executive of Prudential Corporation Asia since Joined Prudential in Prudential plc Annual Report